Hillary
Clinton thinks corporate America has become enamored
with what she calls "quarterly capitalism."

This idea broadly argues that American corporate executives have
become more focused on seeking short-term gains in exchange for
longer-term investments that will more broadly help the economy,
but might not show the kind of immediate return to shareholders
some investors now demand.

Said another way: American companies are no longer allowed by
investors to look past their next quarterly earnings.

"I am deeply distressed about quarterly capitalism because I
think it is causing businesses to make decisions that are not
helping the long-term profitability of American corporations or
the success of our economy," Clinton said. "And I'm on
record for that going back to the time when I was a senator. So I
hear that, but the facts don't bear it out."

Clinton shared with Business Insider an anecdote from her recent
economic-policy speeches:

The story goes that, in one
survey, corporate executives were asked if they would invest in a
five- to 10-year plan that would increase the
profitability of their business in exchange for "a penny"
off of their share price.

None of these executives said they'd do it, with Clinton
adding that one exec told her they couldn't trade
long-term gains for shorter-term pain because the market
wouldn't allow it.

"The answer was, 'I'd be killed,'" this exec told Clinton. "'The
market would kill me. Activist shareholders would kill me. So I
would be spending all my time fending off this attack on me and
the company I wouldn't even get to doing the work that we want to
do.'"

"That's crazy," Clinton said. "That to me is not wealth creation
for the long term."

And according to Clinton, the fix lies in the law and what acting
in the best interests of shareholders really entails.

"So I think we've got to look at corporate law," Clinton said.

She said:

Back in the day when I studied it there were different
constituencies that were to be served, and I think there was a
real wrong turn about 20 to 25 years ago when the theory began to
be promoted that your highest duty, in fact some would argue,
your only duty is to maximize shareholder return. I just don't
buy it.

In
letters to CEOs of the S&P 500 — the benchmark stock
index which houses America's 500 largest publicly traded
companies — over the
last two years, BlackRock CEO Larry Fink has argued that the
best path forward for their companies, the US economy, and the
financial markets is to stop worrying about meeting short-term
financial goals.

Fink's most recent letter called for each CEO to "lay out for
shareholders each year a strategic framework for long-term value
creation" as a way to attract investors and fend off the activist
investors Clinton thinks pressure companies into making decisions
that ultimately hurt shareholders and the broader economy.

Or as Clinton said to Business Insider:

I think there's a lot we could do that maybe would give a little
more decision space to CEOs, to shareholders who want to hold for
the long-term, to investors who want to be part of the long-term,
that they would maybe have a little more room to withstand the
pressure that is otherwise coming down on them.